Arguably, the strength and the major limitation of their approach is that it focuses on the organisation and how it can best rationally respond to its external environment. Focusing on the level of the organisation has the advantage of drawing attention to aspects partly under the control of management, such as formal strategy, structure, and preferred culture. On the other hand, attending to the organisational level may lead managers to assume that, through organisational strategy, structure, and HR systems, they have more power than they really have to change individuals and influence the external environment.Hard HRM assumes that increasing productivity will continue to be management’s principal reason for improving HRM.
The authors proposed a framework for strategic HRM that assumes the needs of the firm are paramount. They said in their view organisations exist to accomplish a mission or achieve objectives and that strategic management involves consideration of three interconnected issues. First, the mission and strategy must be considered because these are an organisation’s reason for being. Second, the organisation’s structure, personnel requirements, and tasks, must be formally laid out, including systems of accounting and communications. Third, HR systems need to be established and maintained because, as the authors state: ‘people are recruited and developed to do jobs defined by the organisation’s formal structure: their performance must be monitored and rewards allocated to maintain productivity’.
The Michigan model observes the different business strategies and related organisation structures can lead to contrasting styles of HRM in activities such as selection, appraisal, rewards, and development. For example, a single-product company with a traditional functional structure (that is, structured according to the various functions of the business – finance, accounting, marketing, sales, production and operations, personnel, etc.) will select its people on the basis of their expertise in the specific functions. Appraisal of employee performance will be largely informal and administered via personal contact; the reward system will vary unsystematically across the functions and employee development will be limited primarily to the functional area in which the employee works. On the other hand, a company with a multi-divisional structure and a strategy for product diversification may have a very different system of HRM. Selection would be systematic and according to both functional experience and general management ability. The appraisal system would be formal and impersonal based on quantitative criteria such as productivity and return on investment and on qualitative, subjective, judgements about individual performance. The reward system would systematically reward contribution to the diversification strategy, and it is likely that bonuses would be paid according to achievement of profitability targets. Employee development would be more complex and systematic than it would be in a company with a single-product strategy. In the multi-divisional company, employees are accustomed to being periodically transferred to different functions and areas of business. Individual development would be cross-divisional, cross-subsidiary and corporate.
The Michigan model represents the external and internal factors of HRM as a triangle
Finally, the Michigan model argues that within HRM there is a human resource cycle affecting individual and organisational performance (see Figure 2.5). It describes the four functions of this cycle as follows:
Performance is a function of all the human resource components: selecting people who are best able to perform the jobs defined by the structure, appraising their performance to facilitate the equitable distribution of rewards, motivating employees by linking rewards to high levels of performance, and developing employees to enhance their current performance at work as well as to prepare them to perform in positions they may hold in the future.
The Michigan model is ‘hard’ HRM because it is based on strategic control, organisational structure, and systems for managing people. It acknowledges the central importance of motivating and rewarding people, but concentrates most on managing human assets to achieve strategic goals. Subsequent empirical research has not produced evidence of organisations systematically and consistently practicing hard HRM, although a longitudinal study (by Truss et al., 1997) of large organisations (including BT, Citibank, Glaxo, Hewlett Packard, and Lloyds Bank) found that employees were strongly managed towards organisational goals. A company practising hard HRM would have a style of management that treats employees in a calculated way, primarily as means to achieving business goals. Its top management would aim to manage the organisation rationally and achieve a ‘fit’ between the organisation’s strategy, structure, and HRM systems.